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The GrubHub Effect: How a Food Delivery Service Alters the Way Restaurants Operate

Last Updated on December 13, 2016

Vivian Giang is a freelance journalist who covers strategy, leadership, organizational psychology and gender issues for Fast Company, Marie Claire, Fortune, Slate, among others. Previously, she was the lead entrepreneurship editor at Mic.com. Prior to that, Vivian launched the Careers vertical at Business Insider, which focused on the evolving office, emerging industries, and the most current employment trends. You can find her on Twitter at @vivian_giang.

Opening and running a restaurant in New York is like a race against time, money, and location. Time because you’re serving busy, hungry city dwellers, money because it costs a hefty sum to operate any New York City business, and location because who knows when the city will decide to install a scaffold above your building and hide your establishment from hungry passersby. These odds haven’t even accounted for the 45,209 other eating and drinking establishments you have to compete against, along with and the grim statistic that 60 percent of restaurants close in its first year of operation.

Then, an idea so simplistic—an online restaurant delivery service—entered the NYC restaurant scene in 2007, offering busy restaurants a chance to focus on their business instead of being tethered to the phone, taking orders, and delivering to customers at a reasonable wait time. Today, GrubHub has expanded into 900 cities, works with 35,000 restaurants, and takes 220,000 orders daily.

GrubHub is Only Getting Bigger

In 2013, GrubHub merged with its biggest competitor, Seamless, and together, the two went public the next year. The company is currently valued at around $3 billion.

But GrubHub isn’t done expanding. In early 2015, the company announced plans to build its own delivery network and now, the company acts as a vital service to small restaurants with OrderHub, GrubHub’s infrastructure products that live inside a restaurant’s system, and DeliveryHub, the company’s delivery drivers said to make automation easier and even more seamless.

And that’s key to small restaurants; the fact that these small businesses no longer have to really change their model by hiring more delivery people or changing up their pricing and ordering methods is everything when it comes to keeping their business afloat. GrubHub’s system takes care of the rest, meaning a higher revenue stream, yet less of a headache in running those revenue streams.

How GrubHub Helps Small Businesses

According to GrubHub’s recently published economic impact study, smaller establishments typically see a 50 percent increase in takeout revenue after one year of joining GrubHub.

Kerri Brewer, co-owner of Mighty Balls, credits GrubHub for driving traffic to its Astoria, Queens storefront in an area where there’s little foot traffic.

“We have people order delivery a few times, then they stop by,” says Brewer.

After years of offering delicious, customizable meat—veggie and bean for non-meat eaters—balls at pop-up food stands in popular markets, like the Hester Street Fair and Fulton Stall Markets, Brewer knew how crucial it was to raise awareness about your food. In other words, finding ways to get as many people to try its deliciousness as possible.

As a result, delivery service was in the cards as soon as Mighty Balls opened its first storefront in July 2015. Within a few weeks of its grand opening, Brewer contacted GrubHub—mostly for its vast customer network—to set up what she calls a “seamless integration.”

Immediately, Mighty Balls saw a jump in sales with deliveries making up 15 percent of its total income. A few weeks ago, Brewer changed the restaurant’s placement within GrubHub’s system, meaning they opted into the service GrubHub offers restaurants to appear higher in search results, and delivery sales now make up 30 percent of Mighty Ball’s total income.

For Brewer, the additional stream of revenue is vital, especially since the small restaurant only seats around 17 people. To date, Brewer has only had to hire one extra staffer for delivery purposes since GrubHub’s system takes care of everything else; the restaurant just has to do what it does best: cook.

Speros Limazopoulos of Trend Diner located in New York City’s Upper East Side is another example of a business that’s been transformed by a delivery service like GrubHub. Since Limazopoulos’ restaurant opened two years ago, it’s had a hard time attracting customers since the storefront is smack in the middle of a construction zone. Consequently, the building is hidden under a mass of scaffolding, tarps and construction tape. To strategize his way out of this business mess, Limazopoulos uses GrubHub for his takeout orders. As soon as he joined, Trend Diner saw an immediate jump in order volume and now GrubHub’s delivery services account for 30 percent of the restaurant’s business.

For Badara “Badou” Diakhate, owner of Badou Senegalese Cuisine, it’s all about a race against the clock. While running his business and doing what he loves most—cooking—Diakhate has little time to answer the phone or strategize new ways to advertise and reach new customers. With tools from GrubHub, he no longer has to do any of that.

According to GrubHub’s study, restaurants that use the delivery service company’s technology can process nearly three times as many orders, which leads to a takeout order volume increase by an average of 20 percent. Additionally, the average order processing time goes from two minutes to approximately 45 seconds, meaning less time wasted on the phone for staffers. The study finds that with GrubHub’s technology, restaurants save about 2.5 hours for every 100 takeout orders received.

The restaurant industry is tough and competitive, especially in an unforgiving place like New York. With so many restaurants going under within the first few years of operations, it’s vital to use all the tools possible to focus on creating and delivering a delicious menu. In recent years, GrubHub has definitely emerged as a ruler in the food delivery industry with its easy-to-use technology. Today, it’s hard to find a city dweller who hasn’t used the service. As a result, GrubHub has an astronomical effect on a restaurant’s bottom line in today’s digital world where accessibility means everything.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those
of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Vivian Giang is a freelance journalist who covers strategy, leadership, organizational psychology and gender issues for Fast Company, Marie Claire, Fortune, Slate, among others. Previously, she was the lead entrepreneurship editor at Mic.com. Prior to that, Vivian launched the Careers vertical at Business Insider, which focused on the evolving office, emerging industries, and the most current employment trends. You can find her on Twitter at @vivian_giang.